BREAKING: ZMF Response to the New Gold Trading Framework
The Zimbabwe Miners Federation would like to appreciate the recent review by FPR in the gold trading framework as announced through its Press Statement of 26 May 2020. The review provides for a flat price of US$45/ gram delivered by small scale producers and a 70/30 framework for large scale gold producers.
ZMF is of the view that this review was invariably long overdue and is a relief from the 55/45 framework that prevailed prior to the new Framework. While the review is a welcome development, the fixed price of US$45/ gram was announced at a time the world price of gold was at around US$54.8/ gram, representing almost 80% of the world price. With the world price of gold expected to continue bullish and further increase on the back of global
economic risks arising from the Covid-19 pandemic which promotes the attractiveness of gold as a safe haven, the price paid to local small scale miners will continue to shrink as a percentage of the world price. The unwanted
consequences of the above pricing distortion are widespread side marketing and leakages as small-scale miners seek better margins from unregistered buyers offering attractive prices.
The sustainability of such a trading framework is also questionable when the price of gold is coming down, for example to prices lower than the US$45/ gram. ZMF is of the view that in that situation, it will not be practically possible for FPR to continue paying the fixed US$45/ gram (which will be technically a price support scheme) given the current liquidity constraints in the economy.
ZMF believes in a gold trading framework that provides a win-win situation between FPR and the gold miner which minimises or eradicates the discrepancy between the world price of gold and local price of gold. This framework curtails side marketing and gold leakages while at the same time promoting the delivery of gold to FPR.
a. A ratio framework as is the case for large scale producers is recommended as it enables scientific tracking of mineral prices. We also propose the fair compensation of any surrendered portion in line with market developments
in order to converge the world and local price of gold to minimise side marketing and gold leakages; or
b. Full compensation in US dollars in line with the prevailing world gold price.
In conclusion, let me take this opportunity to thank the Head of State His Excellency President ED Mnangagwa who is a listening President in that when we interfaced with him in November 2019 he promised that the Gold retention
issue would be looked into and indeed it has received attention. As ZMF we will continue to push for sectorial changes amongst them formalization, mechanisation and above all remuneration which commensurates with the
global prices of the minerals produced.